Understanding silver pricing can be tricky because of the metal’s dual nature. It is an industrial commodity, but fundamentally, silver is money.

A recent report by the Silver Institute attempts to untangle the various factors that go into the price of silver, noting that it’s a difficult job.

“The Report finds that no magic formula or combination of factors consistently and accurately explains the level of or change in the silver price. While the price of silver is not a random walk, neither is its future path entirely predictable based on past trends.

Industrial and technical applications account for roughly half of silver demand. In that sense, you will sometimes see the price movements correlate with the broader commodity complex.

But at its core, silver is money. That brings other factors into the pricing equation such as the strength of the dollar or the trajectory of interest rates. That means silver typically moves with gold, especially over the long run.

“Supply/demand analysis is complicated by silver’s legacy as a monetary metal and its continued acceptance as an investable asset. The result is that above-ground stocks of bullion and investment demand play an outsized role in silver compared to other 'purer' commodities, such as copper or palladium, where stocks are much smaller and investor interest far narrower and shallower. In this regard, silver is closer to gold, whose price to an even greater extent is subject to changes of ownership in its huge level of above-ground bullion stocks and in investor sentiment towards the precious metal.


As you can see from the charm silver tends to outperform gold during a gold bull market.

Silver appears to be underpriced

Whether you’re considering industrial demand, the current monetary climate, or both, silver appears to be significantly underpriced.

Despite wishful thinking in the mainstream, inflation doesn’t appear to be down and out. And if it is, that just means a return to inflationary policies with the Fed trying to push down interest rates. That’s bullish for both gold and silver.

There is also a strong likelihood that something will break in the economy in the near future. The financial system isn’t built to operate in even a modestly high interest rate environment. The Federal Reserve would almost certainly respond to a financial crisis by slashing interest rates to zero and restarting quantitative easing (effectively printing money). These are inflationary policies. There are already signs of stress in the banking system and the commercial real estate market is ripe for a crisis.

When there is high inflation, smart people want to hold real money. This is bullish for gold and silver.

On the supply and demand side of the equation, silver is expected to hit the second-highest level on record in 2024.

Industrial demand for silver is expected to lead the growth in global demand, driven in part by the growth of the green energy sector. According to a 2022 research paper by scientists at the University of New South Wales, solar manufacturers could consume over 20 percent of the current annual silver supply by 2027. And by 2050, solar panel production will use approximately 85–98 percent of the current global silver reserves.

Even if the economy crashes, government commitment to green energy will likely keep the money in that sector.

The Silver Institute projects another market deficit in 2024 with demand outstripping supply. This would mark the fourth straight year of a structural market deficit and further cut into silver reserves.

Given these dynamics, at between $22 and $23 an ounce, silver is on sale.

The gold:silver ratio would appear to confirm the white metal is underpriced – at least in relation to gold.

The has spread to almost 90:1. That means it takes almost 90 ounces of silver to buy one ounce of gold. This is a historically widespread.

The average gold:silver ratio in the modern era has generally ranged between 40:1 and 60:1. When the ratio widens far beyond that range, as it has in recent years, it typically returns toward that mean.

For instance, the ratio fell to 30:1 in 2011 and below 20:1 in 1979.

The pandemic era provides a more recent example. As the Fed cut rates and launched quantitative easing to prop up a shaky economy caused by rate hikes the prior year, the gold:silver ratio climbed to nearly 93:1. As silver rallied along with gold, the gold:silver ratio plunged from over 100:1 to just over 64:1, close to the high end of the historical norm. 

It's pretty clear that silver isn’t priced for the current demand dynamics.

The bottom line is no matter how you weigh the various factors that drive the price of silver, the white metal appears to be a bargain at the current price.

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Recommended Content

Recommended Content

Editors’ Picks

AUD/USD posts modest gains above 0.6600 amid weak UoM Consumer Sentiment data

AUD/USD posts modest gains above 0.6600 amid weak UoM Consumer Sentiment data

The AUD/USD pair snaps the two-day losing streak near 0.6615 amid the consolidation of the US Dollar in Monday’s early Asian session. Meanwhile, the US Dollar Index hovers around near 105.50 after retracing from its highest level since early May near 105.80.


EUR/USD: Central banks’ decisions will keep taking their toll

EUR/USD: Central banks’ decisions will keep taking their toll

The EUR/USD pair slid below the 1.0700 mark for the first time in over a month on Friday, as the US Dollar surged on the back of risk aversion. The dismal mood prevailed throughout the week, with a short-lived exception on Wednesday when softer-than-anticipated United States inflation brought a breath of fresh air.


Gold gains ground as traders dial up Fed rate cut bets for September

Gold gains ground as traders dial up Fed rate cut bets for September

Gold registered limited gains this week, supported by safe-haven flows and soft inflation data from the US. In the absence of high-impact macroeconomic data releases ahead, investors will pay close attention to technical developments in XAU/USD and comments from Federal Reserve officials. 

Gold News

Bitcoin active addresses hit lowest level in five years, BTC ranges below $67,000

Bitcoin active addresses hit lowest level in five years, BTC ranges below $67,000

Bitcoin, the largest asset by market capitalization, has noted a decline in its active address count per data from Glassnode. A decline in active addresses is typical at a time during a surge in Bitcoin transaction fees.

Read more

Week ahead: RBA, SNB and BoE next to decide, CPI and PMI data also on tap

Week ahead: RBA, SNB and BoE next to decide, CPI and PMI data also on tap

It will be another central-bank-heavy week with the RBA, SNB and BoE. Retail sales will be the highlight in the United States. Plenty of other data also on the way, including flash PMIs and UK CPI.

Read more